BAE Systems led gains on the FTSE 100 in early trading, emerging as the index’s strongest performer after U.S. President Donald Trump vowed to significantly increase military spending.
Shares in Britain’s largest defence company climbed as much as 6.9%, supported by expectations of higher U.S. defence budgets. BAE Systems generates nearly half of its revenues in the United States, making it particularly sensitive to shifts in American military spending policy.
Defence Sector Outperforms UK Stock Market
The rally extended across the wider defence sector, lifting stocks on both of the UK’s main equity indices. On the FTSE 250, Chemring led gains, rising as much as 4.2%. The company supplies countermeasures used on Typhoon and F-35 fighter jets, leaving it well positioned to benefit from increased defence procurement.
Overall, defence companies across the FTSE 100 and FTSE 250 rose by around 3.3%, putting the sector on course for a fifth consecutive day of gains and reinforcing its status as one of the strongest-performing areas of the UK stock market.
Geopolitical Risk Drives Defence Stock Demand
Investor appetite for defence shares has been underpinned by escalating geopolitical tensions and signs of growing fractures in the global political order. Markets have been unsettled following reports that U.S. forces captured Venezuelan leader Nicolás Maduro, alongside President Trump’s renewed threats to take control of Greenland.
Further adding to global uncertainty, the United States has seized two Venezuela-linked oil tankers in the Atlantic Ocean, raising concerns about energy supply disruption and the risk of wider international confrontation.
Defence Stocks Seen as Beneficiaries of Global Instability
Periods of heightened geopolitical risk have historically supported defence stocks, as governments prioritise military readiness and national security. The latest developments have reinforced expectations of sustained defence spending growth, helping UK defence companies outperform the broader market.
